Last Updated: January 20, 2021
We’re proud to announce we’ve assisted hundreds of small businesses in Arizona by funding 508 loans totaling more than $46 million during the first round of PPP loans.
Paycheck Protection Program Reopening Soon
On December 27, 2020 the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (Economic Aid Act) became law. This included the reopening of the Paycheck Protection Program (PPP) for eligible first or second-time borrowers.
We are currently building our application process in accordance with SBA guidelines for the new round of PPP loans. To be eligible for a PPP loan (first or second draw) from Arizona Federal, you must meet the following guidelines:
- You must be a current member of Arizona Federal as of December 28, 2020.
- If you received a PPP loan during the initial round (first draw), it must have been with Arizona Federal. If you received a PPP loan from another financial institution, please contact that institution for assistance with a second draw PPP loan.
- If you received a first draw PPP loan from Arizona Federal, you must submit your loan forgiveness application prior to applying for a second draw. Please contact us to begin the process.
Click here to be notified when the PPP loan application will be made available online.
For more information about the new round of PPP loans, please see the following:
- How to Calculate First Draw PPP Loan Amounts and What Documentation to Provide - by business type ( as of 1/17/21)
- Interim Final Rule on Paycheck Protection Program as Amended by Economic Aid Act (as of 1/6/2021)
- Interim Final Rule on Second Draw Loans (as of 1/6/2021)
- Second Draw PPP Loans: How to Calculate Revenue Reduction and Maximum Loan Amounts Including What Documentation to Provide (as of 1/19/21)
Loan Forgiveness Process
We have begun accepting loan forgiveness applications for first draw PPP loans for loans greater than $150,000. To begin the process, please complete the Contact Us form (link below), and a team member will reach out to you with additional instructions.
If your loan is $150,000 or less, we are pausing forgiveness applications at this time. The SBA has developed updated guidance on these loans that will simplify the application process. We are actively working with our technology partner to make the new forms available electronically. We will be in contact once the new forms are available.
NEW – Form 3508S for loans $50,000 or less
The SBA recently announced the new Form 3508S for borrowers with loan amounts of $50,000 or less. This simpler loan forgiveness form requires fewer calculations and less documentation for eligible borrowers.
In addition, borrowers who use SBA Form 3508S are exempt from having to reduce forgiveness amounts if they had a reduction in employees or reduced employees’ salaries or wages during the Covered Period.
We will contact you via email when SBA Form 3508S is available electronically. We are actively working with our technology partner to provide access to the 3508S form electronically, and we anticipate having the form available for qualifying borrowers in late December or early January.
Online Resources & Tutorials
In helping you prepare for loan forgiveness, we have developed additional resources and videos to assist you in navigating the forgiveness process. We hope our PPP borrowers find these resources beneficial. Please contact us if you have any questions or feedback.
Loan Details and Forgiveness Guidelines
PPP loans will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent and utilities (at least 60% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months.
Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease.
This loan has a maturity of five years and an interest rate of 1.00% APR.
Arizona Federal’s Loan Forgiveness Process
Borrowers must apply for loan forgiveness – it is not automatic. As the borrower, it is critical to understand the SBA rules and guidelines.
Although Arizona Federal is not accepting loan forgiveness documentation at this time, the SBA has released its revised Loan Forgiveness Applications (Form 3508, Form 3508EZ or Form 3508S). We recommend that all borrowers begin reviewing the applications and assembling the required documentation for loan forgiveness.
Since Arizona Federal will be setting up an online process for submitting loan forgiveness documentation, we do not recommend completing a paper application, unless that would assist you in compiling your documents.
Check Your EZ Form Eligibility
When you start the online application, be sure to click the "Check Your EZ Form Eligibility" button on the "Calculate Forgiveness" tab to see if you are eligible to use the EZ form.
New Form 3508S for Loans of $50,000 or Less
Borrowers with loan amounts of $50,000 or less may be eligible to use Form 3508S, which requires fewer calculations and less documentation. Refer to the top of this page for more information.
Preparing for Loan Forgiveness
The fact that your PPP loan may be forgiven is obviously one of the most attractive features of the program. But even if your loan is not completely forgiven, it still features very attractive repayment terms: five-year term repayment, 1% APR and a six-month deferment period.
With that said, it will be important for all borrowers to take the appropriate actions and maintain proper documentation to qualify for the maximum forgiveness amount.
Use the funds appropriately
To be eligible for PPP loan forgiveness, the funds must be used for very specific needs. If this money is used for items outside this list, forgiveness is forfeited:
- Payroll – This includes salary, hourly wages, vacation time, 401(k) contributions, family medical/sick leave, other health benefits. A minimum of 60% of the loan must be used toward payroll and cannot include independent contractors.
- Mortgage/Rent/Utilities – If your covered lease, mortgage, and utility service were active before February 15, 2020, up to 40% of your total loan proceeds may be used for rent, utilities and mortgage interest
These expenses are covered for an 8-week or 24-week period, beginning on the date you received the loan funds. Loans funded prior to June 5, 2020, are eligible for the 8-week or 24-week covered period. All other loans default to the 24-week coverage period.
Maintain staffing requirements
The goal of the Payroll Protection Program is to keep employees on your payroll. Therefore, to qualify for loan forgiveness, it is important to meet the program requirements:
- Maintain your employee headcount. This will be calculated by comparing your average number of full-time equivalent employees before February 15, 20201, with the average number of employees on your payroll during the 8-week or 24-week period following receipt of your loan.
- Maintain at least 75% of the total salary/wage during the 8-week or 24-week period for each individual employee who made less than $100,000 in annualized pay in 2019.
- Rehire any employees who were laid-off or furloughed; you have until December 31, 2020, to do this. You must also pay any difference in pay greater than 25% by this same date to qualify for loan forgiveness.
If you do not meet one or more these requirements, your loan forgiveness amount will be reduced.
Depending on your payroll coverage, it may be in your best interests to adjust the payroll cycle to accommodate as many pay periods as possible. For example, you may benefit from temporarily adjusting your payroll cycle from semi-monthly or bi-weekly to weekly.
1 Use one of the following time frames to establish your employee count prior to February 15, 2020: February 15, 2019 through June 30, 2019, or January 1, 2020, through February 29, 2020.
Carefully document how loan proceeds have been used
It may be beneficial to open a separate account to manage and track how the funds are being used. Contact us if you would like to open an account to track your PPP loan proceeds.
You may be required to submit the following documentation to apply for loan forgiveness:
- Verification of all full-time employees on your payroll and their associated pay rates for the time period
- Payroll reports from your payroll provider
- Copies of filed payroll tax forms (Form 941)
- Copies of income, payroll and unemployment forms filed with your state
- Verification of retirement and health insurance contributions
- Verification of eligible interest, utilities and rent payments
The AICPA offers a free online resource that you may find useful for calculating your loan forgiveness amount. Please contact your CPA if you have questions.
Stay informed about current rules
It’s important to familiarize yourself with the latest loan forgiveness rules, regulations and guidance under the PPP. This information may be updated frequently. We encourage you to visit the following websites for the most current information:
Loan forgiveness may be very complex for your business. If you face complicated loan forgiveness questions, we strongly advise you to seek guidance from your CPA or attorney.
Frequently Asked Questions for Borrowers
If your PPP loan was made before June 5, 2020, you may elect to use an 8-week or 24-week covered period, known as your “Loan Forgiveness Covered Period”.
If you do not submit a loan forgiveness application within 10 months after the end of your loan forgiveness covered period, you must begin paying principal and interest after that period.
While we’re happy to explain the PPP guidance (as provided by the SBA), you should also consider seeking assistance from a CPA or other professional to help you determine how to use a PPP loan as part of the overall financing strategy for your business.
Keeping a clean paper trail of the receipt and use of PPP funds will help you to prepare for the loan forgiveness process. Maintaining a separate account for those funds is one of the simplest ways to keep track of the expenses. If you’d like to open an additional account to keep your funds separate, please contact your personal banker.
In most cases applications can be submitted after your 8-week or 24-week covered period ends.
Borrowers will receive an email with a personalized link to complete there Loan Forgiveness Application online. Once you receive this link, you can begin the application process.
Our online application provides tips, information and guidance along the way, making it very user-friendly. In addition, our team can provide general guidance on how to complete the application and the documentation you will be required to submit.
The SBA is offering help with forgiveness applications through many of their SBA district offices, Small Business Development Centers and SCORE Business Mentor programs. Visit the SBA website to find local assistance.
We are unable to provide guidance related legal matters or tax implications. Please consult your CPA or tax advisor for assistance with those questions.
The information and resources on this website are provided as a courtesy. They are not written or warranted by Arizona Federal Credit Union.
Any information provided by sources other than the SBA may be helpful, but please keep in mind that the SBA will make the final determination on all matters related to the PPP, including the amount granted for loan forgiveness.